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Traditional IRAs and Roth IRAs

Posted on 28 December 2008 by Allgen Financial

Definition
A traditional IRA is a personal savings plan that offers tax benefits to encourage retirement savings. Contributions are either deductible or nondeductible. Regardless of whether your contributions are deductible, earnings in a traditional IRA grow tax deferred.

A Roth IRA is another type of personal retirement savings plan. All contributions to a Roth IRA are nondeductible. If certain conditions are met, withdrawals from a Roth IRA, including earnings, are tax free.

Traditional IRAs and Roth IRAs can be used to accumulate funds for college. The 10 percent penalty tax that normally applies to withdrawals from traditional and Roth IRAs before age 59½ does not apply if the money is used to pay the qualified education expenses of you, your spouse, or the children or grandchildren of you or your spouse.

Prerequisites
• You qualify to make contributions to a traditional IRA or Roth IRA
• You, your spouse, or the children or grandchildren of you or your spouse have qualified higher education expenses

Key Strengths
•    Early withdrawal penalty is waived
•    The federal government does not consider the value of your traditional IRA or Roth IRA in determining your child’s financial aid eligibility
Key Tradeoffs
•    Your retirement nest egg is reduced
•    Colleges may consider the value of your traditional IRA and Roth IRA before awarding their own financial aid

Variations from State to State
• States may vary in their tax treatment of traditional IRAs and Roth IRAs
• States vary in their protection of traditional IRAs and Roth IRAs from creditors

How Is It Implemented?
•    Open a traditional IRA or Roth IRA with a bank, financial institution, mutual fund company, life insurance company, or stockbroker
•    Select actual type of investment (e.g., certificate of deposit, mutual fund)
•    Make contributions as desired up to the due date of your federal tax return for that year (usually April 15 of the following year)
Article Written By: Forefield Inc.
Neither Forefield Inc. nor Forefield Advisor provides legal, taxation, or investment advice. All content provided by Forefield is protected by copyright. Forefield claims no liability for any modifications to its content and/or information provided by other sources.

For professional investment advice on this topic contact:
Allgen Financial Services, Inc.
888.6ALLGEN (888) 625-5436
advisors@allgenfinancial.com
www.allgenfinancial.com

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Tags: 401 k, 401k, citigroup, company benefits, fidelity, financial resources, financial transition, finding a new job, layoffs, merck, professional advice, retirement account, Sun Microsystems, yahoo

Getting Laid Off?

Posted on 19 November 2008 by Allgen Financial

As many companies such as Citigroup, Fidelity, Merck, Sun Microsystems, Yahoo and many others are planning major layoffs, Allgen Financial Services, Inc. is planning on helping to ensure these individuals make a proper financial transition.

So often when individuals leave a company they also leave their 401(k) or retirement account behind. Their retirement account is unattended because the primary focus becomes finding a new job to continue generating short-term income. However, it is unwise to ignore the current financial resources already attained.

To put things into perspective: If someone has $300,000 in their 401(k) and it drops by 5%, they will have lost $15,000. Doesn’t it make sense to spend some time evaluating how to best navigate the necessary financial transition when in the middle of a job transition?

Allgen wants to encourage people being laid off to consider making a financial transition a priority as well. Basically, don’t let the emotions of being laid off prohibit you from determining what to do with the resources you have already been able to acquire. A $15,000 loss can potentially take a full year or more to recapture.

If you have not already spent the time looking at your retirement account and getting professional advice, now might be a good time to start.

Additional Resources:
http://www.nytimes.com/2008/11/18/business/18citi.html?_r=1

http://www.nytimes.com/2008/11/15/business/15bizbriefs-FIDELITYLAYO_BRF.html